Constructing Your TSP Options: Follow the Money
By Ralph Smith
Friday, April 28, 2006
Not surprisingly, the phrase was first used in a national political scandal. The movie All the President's Men used the phrase and was apparently invented by Washington Post reporter Bob Woodward or William Goldman, the author of the movie script.
The phrase hits a chord with most of us. Our experience has demonstrated that many people--probably most people--are motivated by money and what it can do for them.
Money drives national politicians. Companies, unions, lobbyists, interest groups and individuals all give money to politicians. We don't give it because they are handsome or pretty or because we like their company. Those who give money usually want something in return for it. At a minimum, the money givers usually hope to influence a vote in Congress or at least be sure their side of an argument is heard.
Politicians, for their part, often claim they are not influenced by money; they just need it to get re-elected (again, and again and again since there are no term limits and the pay, publicity and future retirement benefits are much better than most Americans will ever have). Their real motivation is usually to serve the public interest and they will often tell us this on television, usually with an American flag waving in the background.
A certain amount of cynicism is usually in order.
Politicians and money are intertwined. If you want to find out why a politician voted a particular way on a bill, a first step is often to "follow the money" to see if there was a considerable amount flowing from those with an interest in a particular subject.
So, what does this have to do with your Thrift Savings Plan? Read on.
Many FedSmith readers expressed outrage that their money in the TSP's G fund was recently used (again) to help fund the national debt. (See We're The Federal Government. You Can Trust Us) Why were your retirement funds used for this purpose?
The answer was simple. There is a lot of money there; it was convenient to use; and the government has legal access to it. Put a big pot of money in front of most people and they will probably use it in some way.
Having said that, should Congress dictate which funds should be in your Thrift Savings Plan?
Congress controls the purse strings. It can make or break federal agencies with money. Politicians are also responsive to money and those who have it to give.
When it first started, the TSP was not a big deal. There were a few million and then a few hundred million being pulled together by the federal community for their future retirement. The honey pot, such as it was, was not that full and didn't attract that many flies.
But, a couple of decades later, the TSP has a couple of hundred billion dollars to invest. That is a big honey pot. That much money attracts a great deal of attention. Financial advisers want a piece of this action. Industries of numerous stripes could make a small fortune from getting a small piece of this financial pie. Make your industry's product available to the feds putting in millions of dollars a month and they will come when it becomes part of the TSP program.
A recent article in the Federal Times highlights the politics coming into play with the real estate industry and your Thrift Savings Plan. Some in Congress very much want to add real estate investment trusts into the federal TSP program. Some of those supporting the legislation to require the TSP board to take on this new investment make public statements that many readers would support such as "We want to give federal employees more choices in their retirement investments."
More choice is hard to argue with.
But here is another side. According to the Federal Times article: "The real estate association’s political action committee contributed $265,000 to House members who signed onto the bill — three-quarters of all the money the PAC doled out to House members, campaign records show. In the same period, the association directed an additional $56,000 through other political action committees that wound up going to Porter." (Jon Porter (R-Nev) is Chairman of the House Government Reform subcommittee on the federal work force and agency organization).
So, here is the question. Does Congress want to give the federal community more options in their TSP because it is a good idea? Or, does Congress want to give federal employees more options because the real estate industry has donated millions of dollars to help Congressmen get reelected (again)?
Probably no one will be surprised to hear that those involved are at least somewhat offended by the idea that they would vote for an idea because they got a lot of money to support a particular interest group. "My principles are very clear and have been for 20 years. When someone donates to my campaign, it's based upon a trust that I'm going to do the right thing for the right reasons" says Congressman Porter in an interview with Government Executive.
And, the National Association of Real Estate Investment Trusts, which gave some big bucks to some of the lawmakers who are in favor of adding REIT's to the TSP, also says they are doing the right thing for the right reasons. "Our political contributions are divorced from legislative initiatives such as this" according to a senior official of the real estate lobbying group. According to their website, "NAREIT is the representative voice for U.S. REITs and publicly traded real estate companies worldwide. Members are real estate investment trusts (REITs) and other businesses that own, operate and finance income-producing real estate, as well as those firms and individuals who advise, study and service these businesses."
The motives of those in public life are undoubtedly very complicated. And, when an institution such as Congress is consistently tarred with stories about graft, corruption, bribes and low approval ratings, trusting our leaders to take action because it is a good idea (despite getting large sums of money from those with a vested interest in the outcome) is a big act of faith--especially when the people voting have proven time and again the faith may be misplaced.
Another phrase that has taken hold in American life in the past few years: "Show me the money!" It popped up in the movie Jerry Maguire and is the tale of a sports agent who wants to do the right thing for his clients but is soon hit between the eyes with the reality of his situation.
- Jerry Maguire: "What can I do for YOU, Rod? "
- Rod Tidwell: "It's a very personal, very important thing. Hell, it's a family motto. Now are you ready? Just checking to make sure you're ready (Rod turns his boom box real low) here it is -- show me the money. (He now blasts the boom box at full level) OHHH!!!! SHOW! ME! THE! MONEY! Doesn't it make you feel good just to say that, Jerry? Say it with me one time brother! "
Will Congress impose real estate investment trusts on the TSP? It looks like there is a good chance that wil be done.
But, rest assured, as you can see from those getting the money and those spending the money, it is only your best interests they have at heart.
© 2009 FedSmith Inc. All rights reserved. This article may not be reproduced without express written consent of FedSmith Inc.
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