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American Morning

The Big Question: Can Government Keep Your Retirement Money Safe?

Aired February 06, 2002 - 08:10   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: The big question at this hour: Can the government keep your retirement money safe? It comes as scores of Enron employees grapple with the loss of their savings in the energy giant's collapse. Many are sharing their stories with congressional investigators and emotional hearings on Capitol Hill.

However, CNN has learned that some Enron employees made their own situation even worse. Records show that many were moving money into Enron stock and out of safer mutual funds, even as the company disclosed $1 billion loss. That was one of the first public indications of its impending collapse. The stock shift came before a controversial lock-down period that actually prevented Enron employees from selling their stock, and that many blamed for their savings loss.

One of the hearings on Capitol Hill this morning will focus on safeguarding employment retirement savings. And Ohio Congressman John Boehner chairs the committee holding that hearing. He joins us now from the Capitol this morning. Good to have you with us, welcome.

REP. JOHN BOEHNER, (R) OHIO: Good morning.

ZAHN: Given what our own reporter Brooks Jackson has discovered about these Enron employees actually buying this stock, even after significant losses were posted, what does that suggest to you? Whose fault is it that these employees lost money?

BOEHNER: Well I think as we get into these hearings we're going to have to determine, you know, what were these employees told, what did they know and when did they know it. But as your reporters have pointed out, there continued to be an awful lot of buy and buy employees, even after some very devastating news. What we're trying to determine here for Enron and for other employees is what really happened there? What access did these employees have to other options and what can we learn from Enron that we may be able to use to protect other employees, especially in their retirement and pension areas?

ZAHN: Well isn't it true your committee actually came up with some bipartisan legislation that you believe might have protected some of these people? But it raises the question, is it really the government's responsibility to make sure that people invest wisely?

BOEHNER: Well I think that the 43 million Americans now having self-directed accounts like 401(k)s, it's very clear that what is needed most in the marketplace today is sound investment advice. Employers are prohibited from offering this to their employees. Their suppliers today really have their hands tied in offering to employees specific advice that meets their particular needs.

And we have some employees who are over-invested in company stock. Some are over-invested in a particular segment of the market. And one of the real lessons out of Enron and other examples is the need for employees to diversify their holdings. But they ought to have available to them specific investment advice -- a bill that I authored, worked on for three years -- and passed the House in a broad bipartisan way last November.

ZAHN: So what do you say to the folks who say that simply shouldn't be the government's responsibility. That these investors should seek that kind of advice independent of company managers?

BOEHNER: Well, wealthy and high level executives typically get this kind of treatment -- get this kind of advice -- whether they're on their own or through a benefit plan. But the fact is, the average employee does not have access to this. They don't want to invest their hard-earned money in securing this. And, today, the only real access they have to it is really high-priced independent financial advice.

We think that if we would loosen the safeguards a bit, allow limited liability to employers so they wouldn't be sued for the advice that was given, and allow those to offer products to also give advice, considering that they have to disclose conflicts and differences in fees, then we can get more investment advice out there so that employees can, in fact, make better decisions on their own behalf. These bills that seem to try to limit how much of a company stock an employee can have in their plan, I think our ludicrous. These are employee decisions, but we ought to make sure that they've got the best advice available to them in order to make better decisions.

ZAHN: And I know you say it's going to be the role of your committee to sort of establish what kind of information these employees got and when. But the fact remains that a lot of employees stayed with their Enron investments long after many red flags were raised. Shouldn't they -- I mean, obviously, there's a great deal of empathy for people having had their life savings wiped out, but shouldn't they bare any ounce of responsibility for what happened to them? Or do you think it's all the company's fault?

BOEHNER: Well 43 million Americans holding self directed accounts -- now this is a great example of what can happen. Now we don't know whether they were victims of criminal activity or very poor judgment on the part of their management; that's for other committees to decide. What we want to look at is really just how much flexibility and how many options did these employees have and try to learn from this. Not that we're here to take care of these employees, but we want to learn from this to try to help the other 43 million Americans who have such accounts.

ZAHN: Have you seen the evidence of securities fraud in any of the information you've looked at? BOEHNER: We don't deal with that in our committee. We strictly deal with health and welfare issues, pension issues for employees. But from what I've seen at this point, there's an awful lot of information out there -- an awful lot of investigations -- a large number of investigations underway. I think we're going to have to wait and reserve judgment on just what did happen.

ZAHN: And do you expect Kenneth Lay to do anything other than taking the fifth if he shows up on the 12th and the 14th for those various congressional hearings?

BOEHNER: I think it's too early to tell. But one thing we do know is that we can, in fact, improve the safeguards protecting Americans' pensions. This is something that they're very concerned about. We're going to take a very close look -- two hearings this week and a hearing again next week -- and try to determine just what is it that we can do to give employees better retirement security.

ZAHN: We wish you good luck with those investigations. Thank you so much for joining us this morning.

BOEHNER: Thank you.

ZAHN: John Boehner of Ohio -- excuse me, David Boehner -- Jack.

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