Retire Rich

March 31, 2008

Payback Time

With ink from the news of the 2008 Recession already drying in the textbooks and the Big Chill on Wall Street overriding Hookergate glee, it's time, as they say, to think outside of the box.

The $5 billion Eliot Spitzer amassed from mutual fund companies in the late-trading and soft-dollar scandals of 2003-2005, let alone the billions in fees sanctioned firms were forced to forfeit in the A.G.'s strong-armed settlements, is just sitting there. No one, not even the MIT and Ph.D. economics geniuses that have been brought in, can figure out how to properly assess and disburse the money to the investors who were harmed.

Throw out that debate, I say. It's a dead end.

Instead, let's go back to square one and ask ourselves, what was that money collected for in the first place? It was to repair damages done to the investor. And how much was each Main Street investor harmed, you may ask.

"Not much" has been the repeated and unanimous answer. Each person is due a check for between pennies and one to three bucks. Even large institutional investors stand to be reinstated less than $100 apiece.

So, let's step back once more and do some original thinking.

The federal government should take that $5 billion, just sitting around, and infuse it back into the mutual fund industry, where it belongs. That $5 billion belongs to each and every investor in the market-those with international portfolios that were vulnerable to market timing, as well as those who were completely oblivious to the profits being skimmed.

Take the money and give it back to the market at a time when the economy has never been so precarious in 100 years. Use it constructively to support a market that has been largely successful over the past several decades but is being dragged down by the credit crunch.

The Great Depression of 1929 didn't begin in that year, by the way. Almost to the date, there were political and socioeconomic events in both the first and second decades of the 20th century that led up to the market's 1929 freefall.

The government forced Spitzer out of the Office of New York State Governor for a reason. It paves the way for much reform.

Let one of the more critical and meaningful reforms be a revisitation and rewrite of the Securities and Exchange Commission's restitution laws.

(c) 2008 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

http://www.mmexecutive.com http://www.sourcemedia.com

Recent Posts

Mutual Funds Must Go High-Tech-v. 3.0

Over the last number of years, mutual fund transfer agencies and shareholder communications companies have tried to convince shareholders to accept paperless summary prospectuses, proxies, trade confirmations and electronically stamped signatures. Fund supermarkets and web home pages have broadened their horizons to include market commentary, videostreaming and personal financial news. At the same time, exchange-traded funds, funds-of-funds, hedge FoFs, unified managed accounts, target dates, 401(k) auto enrollment and heightened awareness among people throughout the country of the difficulties of being retired-have taken off.

Test of the Massey Mine

Fund giant boards of directors at AllianceBernstein, American Funds, Fidelity, Vanguard and others are reportedly starting to bring about meaningful change in the corporations in which they are invested. Proof should come any day now, when the shareholder proxy votes from the annual meetings are released. Fund chief executive officers spoke about the power and influence their proxies wield in an interesting Reuters article last week, "Mutual Funds Seek to Shed 'Rubber Stamp' Tag."

Milestones

In 2011, 401(k) plans will turn 30, but the milestones the mutual fund industry has reached in this time are but a nanosecond in the history of U.S. retirement policy. Executives we interviewed for this special edition of Money Management Executive for the Investment Company Institute's meeting in Washington, speak to important milestones of the recent past and into the future. Look inside for observations and forecasts by Ted Benna, Robert L. Reynolds, Dan Fuss, David C. John, Steven Miyao and others.

At Age 30, It's Time for a Revamping for the 401(k)

This year marks the 30th anniversary of the 401(k), the revolutionary retirement savings vehicle that has been annihilating pension plans, empowering individuals to take part in the stock market-and, sadly, that left retirees with the misfortune of leaving the workforce in 2000 or 2008 very badly off. The cracks in the system are prompting many asset managers, regulators and retirement experts to take a hard look at 401(k)s and how they can be fixed.

Index of Posts

0 Comments

Be the first to comment on this post using the section below.

Add Your Comments...

Already Registered?

If you have already registered to Money Management Executive, please use the form below to login. When completed you will immeditely be directed to post a comment.

Not Registered?

You must be registered to post a comment. Click here to register.