It will not be a big surprise to any federal employee who pays attention to politics and a decision by the Federal Retirement Thrift Investment Board (FRTIB) to invest more of the I Fund in Chinese companies.
With America and the rest of the world going through a pandemic from COVID-19 and the politics surrounding Chinese involvement with this virus, a move to start spending $50 billion or so from the retirement investments from federal employees and military personnel in Chinese companies later this year has captured the attention of interested parties.
The I Fund and National Security
As noted on FedSmith a few days ago: “Some former military commanders have objected to TSP money in the I Fund being invested in Chinese companies including ‘weapons manufacturers, U.S.-sanctioned entities and other malevolent enterprises of the Chinese Communist Party.'”
When federal retirement investments become intertwined with concerns about national security that has attracted the attention of the White House, it does not take a seasoned political observer to anticipate there will be significant changes in the wind that will impact the Thrift Savings Plan (TSP).
One report stated President Trump was described by a source as “incredulous” over the prospect of the TSP going forward with a planned change to its international stock fund (I Fund). No doubt, the political pressure was building to change the Board’s previous decision.
FRTIB chairman Michael Kennedy and chairman of the Employee Thrift Advisory Council Clifford Dailing previously wrote an op-ed published in Government Executive in which they responded to criticism emerging in Congress over the change to the I Fund by arguing the decision is in the fiduciary interests of TSP participants.
TSP funds are solely the property of plan participants—it is not federal money and it is not taxpayer money. Choices on how to invest in the TSP funds belong solely to the participants. The FRTIB is required by Congress to make decisions that are in the best interest of all TSP participants, and not consider issues better left to other federal entities.
That philosophy may have carried the day prior to the emergence of the COVID-19 virus and the political winds shifting as China is now seen by some to be more of a political rival and adversary to the United States.
With this background, it did not take long for the White House to pursue one of its options by making new nominations to the FRTIB which, if they are confirmed, will remove several of the current Board members.
New Nominees to Thrift Investment Board
Several members on the FRTIB have expired terms and were appointed by President Obama. On May 4th, the White House sent to the Senate requesting confirmation of new members of the Board that will replace several of the current members.
The Trump administration appointees, if confirmed, would be a majority of the FRTIB. That means it is possible the White House could see a reversal of the board’s 2017 decision to allow the I Fund to track an index that includes some China-based stocks of companies accused of a variety of issues including human rights abuses, violating sanctions, and aiding the Chinese military.
The new nominees would replace current FRTIB Members Michael Kennedy, David Avren Jones and Ronald David McCray.
The new nominees are Frank Dunlevy, John M. Barger and Christopher Bancroft Burnham.
Frank Dunlevy is the Counselor to the CEO of U.S. International Development Finance Corporation (DFC). He previously had similar duties at the Overseas Private Investment Corporation (OPIC) before its transformation to DFC.
Christopher Bancroft Burnham is the former treasurer for the State of Connecticut and held senior positions in the US State Department and the United Nations. He was a co-founder and currently chairman and chief executive officer of Cambridge Global Capital, LLC, headquartered in Washington, D.C.
John Barger is Managing Director/Principal at NorthernCross Partners, LLC in Los Angeles, California.
Impact on Expansion of I Fund Investments
The Senate is back in session and will be quickly focusing on new nominations by President Trump to fill government positions. Whether the three new nominees to the FRTIB will be confirmed quickly remains to be seen.
With the politics involved regarding the I Fund now in the national news, President Trump’s stated concerns about the FRTIB action and the concerns of some former military leaders about putting a large amount of money from federal retirees and military personnel into Chinese companies, there is a chance the confirmation of these nominees will be processed more quickly than would normally be the case.
But, as noted previously to readers, we will follow this and provide information as it becomes available.