Date: 2001-11-14
Speaker: GEORGE MILLER (democrat)
Chamber: H
State: California

Mr. Speaker. I thank the gentleman from New Jersey for yielding time and I rise in opposition to this legislation. It has been said time and again. and we all agree. that pension plan participants need to get additional advice on the investment of their moneys. We have made the point that for the new generation of workers. these pension plans. the 401(k) plans. are going to become an ever more important part of their future retirement and that we must take care with the investment of those funds by these employees to make sure that in fact that will be there when they decide to retire. We also know that these funds. unlike their Social Security retirement. are subject to the ups and downs of the market. It will be important how they make these investment decisions because the timing of when they retire may not necessarily coincide with the good cycle in the market. as many people have found out over the last 2 years. We now hear more and more of our constituents telling us because of the loss of the markets. because of the placement of their investments. they are going to have to work a couple of more years. they are not going to be able to retire like they thought. or one of the wage earners in the family is going to have to continue to work. So these funds are subject to the volatility of the market. but that is understood. And it is also understood that we believe that over the long run people will be better off with the investment of these funds in their 401(k)s. The question then comes. the question of the type of adice that they can be given by their employer. We know that there were many. many employers over the last many years that basically made a decision that the 401(k) funds if they were a publicly held corporation would be invested in the stock of that corporation. Obviously in many. many instances the workers in that corporation lost much of their investment. some of them did very well. but the concentration of the money in those funds. the failure to diversify that investment in many instances harmed the employees. and now we require that they be given other alternatives. that they be given other options so that they too can diversify their portfolio and they are not locked into a single stock. But the question now that arises in this legislation when we give them the option of that advice. do we give them the right to have an independent review of their account. an independent advisor who is in the business of advising. not necessarily in the business of advising and also managing stocks and portfolios for this client and for other clients? I think it is just basic and fundamental about treating workers with a set of rights about the dominion over their funds. The notion that somehow this changes the expense of it and is not worthwhile. this advice given to a group of participants is not that expensive but it may be terribly. terribly expensive to the employee if they do not get advice that is not conflicted. We have great brand names. We have Lehman Brothers. we have Merrill Lynch. we have Charles Schwab. We have houses that now are not just any longer investment banks. they are not just any longer stock brokerages. They run the gamut. They are wholly owned subsidiaries of Citicorp. or in fact they own other subsidiaries. and what we have are very complicated financial arrangements. In many instances. we have seen over the last couple of years. and especially in the downturn in the market. that a number of these companies hold on to advice long beyond the time when the prudent ordinary person would decide to sell that stock. It has become a standing joke now. I think they even have theme music on CNBC in the morning for those advisors who will not give up their recommendation to buy stocks even though the stock now has been down for 7 or 8 months in a row. it has lost 70 to 90 percent of its value. and they are still telling them to be in there. Lo and behold. when you start to look at some of this. as the stock exchanges have. you find out that they hold a position or they are managing the money for the executives of the company. not necessarily do they hold a position in that company. but they hold another position with the executives in managing their portfolios. They do not want to upset them. so they are telling the old American public. "Buy this stock. Were on our way back." The fact of the matter is people have been torched. That is subject to disciplinary actions again. But in this legislation. that conflicted advice necessarily is not out of order here because they have a system of disclosure. and that disclosure is given once a year and then you are on your way. What you find out is the way the bill is written. under the law. that the fiduciary relationship that we keep talking about does not really exist because the law is set up that the person whose funds it is. the employee. has to make a decision. buy this stock. make this investment. put it in this fund. Once they do that act. they relieve the advisor under the law of all responsibility. Obviously. they should be making the decisions. but the way this legislation is written. once they do that. they have cleared the decks in terms of liability under any sense of fiduciary relationships under the law. because as we see under section 404 of the ERISA law: "No person who is otherwise a fiduciary shall be liable under this part for any loss. or by reason of any breach. which results from such participants. or beneficiarys exercise of control." Then you go to the law. and the law says the beneficiary must exercise control. At that point we are home free. I just think that we have to understand now that the change in the marketplace. the interlocking relationship between a whole range of financial services. a whole range of financial entities requires that in fact we have the means by which the employee can get independent advice to make their decision on. I do not believe that this legislation as it is currently configured does that. That is why I would hope that Members would support the AndrewsRangel substitute. which I think is a very reasonable compromise. It provides for minimum advisor qualifications. Imagine that. having somebody who is in fact qualified to make this determination advising the individual. How about having meaningful disclosure? We just passed here legislation where we told the banks that they had to disclose what they are going to do with your financial data. What we found out is people got in the mail. sometimes they got two or three pages. sometimes they got one page. they got little. tiny print. and the Congress is running around saying to the banks.