Fed's Flow of Funds Report Shows US Corporate Plan Assets Shrank 6.8% in Second Quarter

The latest quarterly “flow of funds” report issued by the central bank reveals US corporate defined benefit and defined contribution plans had combined assets of $5.32 trillion as of June 30, a dip from three months prior.

(September 19, 2010) — According to the Federal Reserve’s Flow of Funds latest report, US corporate defined benefit and defined contribution plans had combined assets of $5.32 trillion as of June 30, a 6.8% drop from three months earlier.

As of June 30, while corporate DB plan assets amounted to $2.05 trillion, down 5.4% from the previous quarter, corporate DC plan assets came to $3.27 trillion, down 7.5%, as reported by Pensions & Investments. Meanwhile, total assets in state and local government retirement funds were $2.56 trillion, down 8.2%, while the federal government’s retirement funds totaled $1.311 trillion, down 1%.

Additionally, the report concluded that household net worth — the difference between the value of assets and liabilities — fell to $53.5 trillion, far below the $64.2 trillion it had reached at the end of 2007 when the recession began. The report revealed financial assets, mainly stocks and mutual funds, faced steep declines, with stocks alone down $1.9 trillion to $14.9 trillion, more than offsetting minor gains in other areas.

While federal government debt increased during the second quarter by 24.4%, reflecting billions of dollars invested by the Obama administration to try and jumpstart a faltering economy, state and local government debt shrank 1.3% during the same period.

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To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Morgan Stanley Execs Fight for Dismissal of Shareholder Suit Over Pay

Morgan Stanley lawyers have argued that shareholders had not shown legal standing to seek damages at trial and are seeking to dismiss their lawsuit, partly on grounds that the allegations were too vague.

(September 17, 2010) — Morgan Stanley Chairman John Mack and CEO James Gorman have sought to defeat a shareholder lawsuit filed by two pension over “unconscionable” compensation the company paid to employees.

The case highlights anger and dissatisfaction among shareholders who seek to recover billions in compensation, alleging that they suffered harm from the conduct of executives and directors during the financial crisis.

“The problem of the conduct is that it puts the interests of employees, senior executives of Morgan Stanley, before the interests of Morgan Stanley investors,” Jay Eisenhofer, a lawyer for the Security Police and Fire Professionals of America Retirement Fund, argued in court, Reuters reported. He added that there was “no relationship” between pay and profitability at Morgan Stanley, and that compensation was awarded without regard to profitability at the company.

Among the shareholders that filed the lawsuit are the $814.5 million Central Laborers’ Pension Fund, Jacksonville, Ill., and the $5.8 million Security Police and Fire Professionals of America Retirement Fund, Roseville, Mich. According to the lawsuit, the company’s board “abdicated their responsibility” to manage compensation plans in the interests of the company and shareholders. While shareholder value dropped to less than $30 per share from a high of $90 per share, Morgan Stanley reportedly paid a total of $45 billion in compensation for 2006, 2007 and 2009.

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In addition to Morgan Stanley, Goldman Sachs Group Inc, which paid out $16.2 billion in compensation in 2009, has also been the target of lawsuits over its pay practices.

The Morgan Stanley case is Security Police and Fire Professionals of America Retirement Fund v John Mack, James Gorman et al, New York State Supreme Court, New York County.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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