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.