New York Lawmaker Proposes Bank Bailout by Public Pensions

February 10, 2009 ( - A New York Congressman has proposed allowing public pension programs to pool some of their funds to buy $50 billion to $250 billion in preferred stock to shore up America's banks.

Representative Gary L. Ackerman (D-New York) said his plan might relieve the U.S. Treasury of carrying the entire burden of a bank bailout as part of a government economic stimulus package, according to a New York Times report. Ackerman, a member of the House Financial Services Committee, has been circulating a draft bill and assessing support, the Times said.

Ackerman’s measure also calls for the Treasury to guarantee the funds’ principal, plus an annual return of about 8.5%. According to the newspaper, the guarantee would allow public pensions to achieve approximately 8% investment returns without taking on risk many are not permitted to accept.   

While Ackerman is aware public pensions have taken a sizable asset hit from the slumping markets, he contended that the plan is still viable because the plans do not need all of their assets immediately.

“Some of us are getting tired of writing checks with public money” and seeing no results, Ackerman told the newspaper.

The news report said a federally guaranteed 8.5% return would allow public funds to avoid having to go back to taxpayers for potentially sizable cash infusions.

Ackerman, while acknowledging pension decisions by lawmakers in some states have ultimately proven misguided, insisted the steps he was suggesting were still important ones. “Sometimes, you have to do things to benefit people who didn’t behave so well,” he said.