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Cleaning up (on) Wall Street



Were you shocked, shocked to learn that state Treasurer Richard Moore, whose job is to invest the state's pension funds, has been taking campaign contributions from the very suits he pays to help him make those investments? The same Richard Moore who'd like to be your next Democratic governor?

If so—if you roll your eyes at the news that a politician is a politician—try to fix your mind on this number: $73 billion.

Even in 2007, $73 billion is a lot of money.

Well, that's how much is entrusted to Treasurer Moore on behalf of the prison guards, school custodians and other public employees whose retirements depend on the state's pension funds.

It's so much, in fact, that a little politics around the edges—a little kickback to the treasurer, or the governor, or hell, everybody in Raleigh with an office and a window—wouldn't really differ.

Not so's you could prove it, anyway.

Which is exactly why you gotta keep politics out of it.

Especially if, like Moore, you're presenting yourself as a reformer, someone out to clean up Wall Street.

But as the Charlotte Observer and Forbes magazine writer Neil Weinberg reported recently, Moore looks more like a guy cleaning up on Wall Street. Since he was re-elected in 2004, he's raised nearly $400,000 for his campaign fund from investment firms who get money from his office, and $736,000 since he first ran in 2000.

To be fair, there's no evidence, or even the suggestion, that Moore is overpaying his investment advisors so they can kick something back. Actually, the Charlotte Observer calculated that management fees paid by the treasurer's office in fiscal 2006 were below the average for other public pension funds.

However, that below-average number was $156 million!

At that rate, YOU don't have to overpay.

The $156 million in fees paid by Moore's office were less than one-quarter of 1 percent of the $73 billion invested, below the average of one-third of 1 percent paid by other public pension funds. But it's still more than the one-tenth of 1 percent paid by my trusty Vanguard 500 index fund, which invests broadly across the stock market without trying to pick the winners and losers.

The Vanguard 500 fund returned 15.64 percent to its investors in 2006. Moore's funds, he told the Charlotte Observer, were good for 11.42 percent. (The results aren't published yet.)

So for all we know, Moore's investment "team," before lifting their martinis, threw darts at the stock market listings, and they did almost as well as the folks in blindfolds at Vanguard.

But the point is not whether Moore's gang is doing better with our money than we would, or Vanguard would, or my Uncle Harold, rest his soul—and Uncle Harold knew all the horses and the jockeys and the trainers, and he always drove a new Cadillac.

However, there are laws that constrain the treasurer that did not concern Uncle Harold, nor, for that matter, do they hamper Vanguard. Our treasurer must invest in bonds to a ridiculous degree, thanks to a state law, and is limited in how much he can put into hedge funds, venture funds and the like. He's not allowed to get average results, in other words.

What he is allowed to do—and what he's entrusted to do—is take our money to Wall Street and the London FTSE and the Hang Seng in Hong Kong and, within the legal constraints, do his level best with it for us, and not for himself.

Come to think of it, that's what we want from all public officials, isn't it? To use our money for the public good, not their own?

But even by that standard, the treasurer's job is an ethical class all by itself. No other public official in North Carolina, not even the governor, controls $73 billion by himself. And no one else is allowed to pay advisers huge sums of money with little or no accountability.

For instance, who's to judge whether Quellos, a hedge fund firm in Seattle, was "worth" the $6.1 million it received from our treasurer in '06 to handle $400 million of our money? But Quellos was worth $29,000 to Moore in campaign contributions from its executives over the last several years.

North Carolina is one of just four states where a single public official has control over the pension funds. Bottom line, then, he shouldn't be using his office as a steppingstone to the governorship. And if he insists on doing so, he absolutely should not be taking contributions from investment firms to get there.

Moore's been on notice about this since 2002, when Business Week first pointed to the hypocrisy of his self-publicized crusade—along with a pair of state officials from California and New York—to clean up the financial services industry. "It's hard to take them seriously when they at least appear to have conflicts of interest of their own," the magazine said.

In 2007, it's even harder.

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