Joshua Gotbaum, an operating
partner at the private equity firm Blue Wolf Capital, told members of the U.S. Senate
Health, Education, Labor and Pensions Committee during
confirmation hearings Wednesday that the Pension Benefit Guaranty Corp. (PBGC) needs
serious attention to deal with its problems.
"We
all know the PBGC is going through hard times, just when it is needed more than
ever. Its finances are out of balance. Despite improvements, its service
continues to disappoint some; its benefit levels frustrate others,"
Gotbaum testified at his confirmation hearing, according to the Detroit News.
Gotbaum’s
comments touched on a number of potentially controversial items regarding the
PBGC including a move under the Bush administration to invest more of its
assets in potentially riskier investments that officials at the time said they
thought would provide higher returns. Former director Charles E.F. Millard was criticized for
the move (see Millard Defends PBGC Investment Policy Change).
According
to the news report, Gotbaum told the panel he would work for a "sensible and
defensible" investment strategy, but offered no concrete proposals, calling only
for a "mix" of investments. "I
don't think the PBGC can be turned into a government-run hedge fund,"
Gotbaum told the panel, adding that neither should the PBGC simply invest in
ultra-safe Treasury bonds.
Gotbaum
also faced some questions regarding his decision to recuse himself from any
matters regarding the agency’s handling of pension issues for auto-parts maker
Delphi Corp.
Because
Gotbaum has done consulting work for Elliott Management Corp. on its Delphi
investment and received a bonus from Elliott, he will not participate in any
Delphi matters for one year, he told the panel, according to the News.
Elliott is one of the major owners of Delphi, now that it has emerged from
bankruptcy in October as Delphi Holdings LLP.
Delphi's
decision to shift its pension plans to PBGC gave the agency $6.7 billion in
costs for plans covering more than 70,000 people. Delphi employees have fought
the PBGC’s actions to administer the plans (see Judge Says PBGC Must Prove Delphi Plan Properly Terminated).
Two
senators, including Mike Enzi (R-Wyoming), raised questions about Gotbaum's
decision to recuse himself. In fact, Senator Sherrod Brown (D-Ohio) questioned whether Gotbaum should win confirmation since he can't deal with Delphi. "Why
should we confirm you if you are taking yourself out of something so
important?" Brown asked, according to the news report.
Gotbaum
responded that he had to preserve the agency's integrity by recusing himself from Delphi
matters and that there is much more to the job of the PGBC than Delphi. He vowed
Delphi retirees would be treated responsibly.
If
confirmed, Gotbaum would replace Millard who stepped down with the White House
administration change in January 2009.
Video of the
Gotbaum hearing is available at the HELP Committee Web site, here.