5/15/18

Trump Picks Mitch McConnell’s Brother-In-Law, Gordon Hartogensis, To Lead Pension Agency
Experts say the choice to lead the Pension Benefit Guaranty Corp. wasn’t based on qualifications.

Please see our comments below article.

President Donald Trump has picked Senate Majority Leader Mitch McConnell’s brother-in-law — a man with apparently no government experience and unclear qualifications — to lead a Department of Labor agency responsible for current and future pensions of about 1.5 million people.
Ethics experts questioned the choice, with one suggesting the nomination was granted on a “who you know rather than what you know” basis.
The White House announced Monday that Gordon Hartogensis had been tapped to head the Pension Benefit Guaranty Corp. He was described as “an investor and technology sector leader with experience managing financial equities, bonds, private placements, and software development.”
The announcement failed to list a current job for the nominee, and did not mention that Hartogensis is the brother-in-law of McConnell and his wife, Transportation Secretary Elaine Chao. Hartogensis is married to Chao’s sister, Grace Chao.
Amazing. Trump just nominated Mitch McConnell & Elaine Chao’s brother-in-law to lead the nation’s pension agency. The White House announcement doesn’t even list a current job for him & WH won’t answer questions. Below, his announcement vs. a typical one >> https://www.bloomberg.com/news/articles/2018-05-15/trump-nominates-mcconnell-brother-in-law-to-lead-pension-agency …
— Christina Wilkie (@christinawilkie) 9:12 AM – May 15, 2018
According to his LinkedIn page, Hartogensis has managed his family’s trust for seven years. He previously served as the CEO and co-founder of software company Auric Technology, his profile says.
Hartogensis, according to The Washington Post, has no apparent experience in public service and his understanding of PBGC’s mission is unclear.
The PBGC, which helps to sustain payments on single-employer and multi-employer pension plans when pension funds fail, is currently facing a widening, multibillion-dollar deficit. According to Bloomberg, the agency’s multi-employer program, which backs pensions operated jointly by employers and unions, is expected to become insolvent by 2025.
“The White House’s process for naming and vetting candidates is flawed,” Scott Amey of the Project on Government Oversight told the Post on Tuesday in reaction to Hartogensis’ nomination. “This seems to be another example of who you know rather than what you know.”

An unnamed White House official pushed back against the suggestion that Hartogensis was anything but qualified, telling CNBC that his experience as an investment manager “makes him uniquely qualified to run the PBGC.”

“Since 2013, PBGC’s deficit has doubled, and he will use his strong business skills to put the PBGC back on a firm financial footing,” said the official.
Hartogensis’ nomination requires confirmation by the Senate. If confirmed, he will replace Tom Reeder, who was appointed by former President Barack Obama in October 2015.
Prior to leading the PBGC, Reeder, an attorney specializing in national employee benefits, served for many years as benefits tax counsel in the Treasury Department. He also served as benefits counsel for the Senate Finance Committee and health care counsel for the Internal Revenue Service.” Writes the Huffington Post.

As you can see, the current PBGC manager Tom Reeder, had credentials that matched the task at hand, but alas, he was a Obama appointee. On the other hand Hartogensis’ only relevant credential is that he is Mitch McConnell’s brother-in-law! A White House spokesman actually said that Hartogengenis’s “unique experience as an investment manager makes him uniquely qualified to run the PBGC.” Further “Since 2013, PBGC’s deficit has doubled, and he will use his strong business skills to put the PBGC back on a firm financial footing” said the official. Unique experience indeed!

Admittedly, the PBGC is having problems. This is due to the fact that the agency insures private companies and unions’ defined benefit pension plans. These plans have been in quite a bind since the damage caused by the 2008 financial meltdown. Moreover, the corrective action of the Fed, mainly keeping interest rates down, has dramatically hurt these pension plans even further because they largely depend on getting positive returns on their investments absent taking undue risk. Defined benefit plans favor bond investments, and the yields on safe bonds has been very low due to the Fed’s low interest rate policies.

Many of the pensions are now underwater, and likely to need bailouts, are underfunded, because they continued to assume that interest rates (and therefore the returns they would recieve) were going to be much higher in ensuing years. Thus, to keep up, companies would have had to keep putting more money, much more than they originally bargained for. Many companies couldn’t afford that. Some companies have already gone belly up, which is when the PBGC is required to bail out their pensioners. And after bailing them out, the PBGC must raise the premium for pension insurance on all other existing defined benefit pension plans.

Meanwhile, companies in the thousands, have been opting out of defined benefit pension plans (to avoid the liability of guaranteeing higher than safely achievable investment returns) and transferring to 401K and profit sharing plans. When they make this modification, they no longer have to pay premiums to the PBGC (for the guarantees) which means that the PBGC has even less money to bail out the remaining failing defined benefit plans.

The skills required to fortify the PBGC, have nothing to do with Hartogenis very modest investment skills as an “investment manager” “”which makes him “uniquely qualified” (a laughable comment) to run the PBGC.”” Please check his “experience” as founder of a private company “Auric” which he cofounded, and has nothing to do with investments or pension law. Guaranteed that Auric doesn’t even have a defined benefit pension.

This is just another sad example of nepotism, mutual back slapping, etc, like so many others in the Trump administration. And moreover, a payback for McConnell’s loyalty. It is so transparent, and so really sad.