WASHINGTON -- House Banking Committee Chairman Henry B. Gonzalez is focusing. his concern over derivatives down to the state level.
In a letter last week the Texas Democrat asked National Governors Association chairman Howard Dean, the governor of Vermont, to request that his counterparts examine derivatives investment occurring in their states.
"I respectfully request that you ... ask our nations's governors to alert their states' pension funds, universities, school districts, and other public entities about the risks posed by derivatives," Rep. Gonzalez wrote.
He enclosed a copy of testimony by Government Finance Officers Association member Alan McDougle before the House Banking Committee, in which Mr. McDougle recommended that state and local governments exercise caution when investing in derivatives.
In addition to the letter to Gov. Dean, Rep. Gonzalez responded to a letter from Labor Secretary Robert Reich. Mr. Reich, at the behest of Rep. Gonzalez, had provided a written explanation of how the Labor Department monitors derivatives activities of pension funds.
"Nothing we have seen to date suggests the widespread investment of pension funds in inappropriately risky derivatives," Mr. Reich wrote.
In his response, the House Banking chairman said he was "reassured" to learn that the Labor Department "appears to be aggressively investigating reports of improper derivatives investments."
Yet he remained concerned because the department does not collect information on the derivatives holdings of pension funds.
"Can pensioners adequately understand their pension fund's exposure to derivatives if this information is not made public?" Rep. Gonzalez wrote.
