
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, June 23, 1994                   TAG: 9406280015
SECTION: BUSINESS                    PAGE: B-6   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

PENSION FUNDS URGED TO SPUR JOBS

The Labor Department on Wednesday issued new guidelines designed to encourage pension funds to make investments in affordable housing and other socially useful programs, as two members of the president's Cabinet testified in support of such initiatives.

Labor Secretary Robert Reich and Housing and Urban Development Secretary Henry Cisneros both told Congress that the administration strongly supports a major increase in targeted pension fund investments. Reich said the $4.6 trillion in pension funds represents the biggest pool of money in the country and in a time of tight government budgets it should be mobilized to help create jobs and address social needs.

Pension funds ``are positioned like no other force in the American economy to raise incomes and spark new jobs,'' Reich said.

During his election campaign, President Clinton promised to deliver programs that would tap pension funds for public purposes. Cisneros on Wednesday outlined a HUD program that he said will produce $1.2 billion of affordable housing by attracting pension fund investment as a key element, along with $100 million in federal funds and guarantees.

``We are attracting pension fund investments in housing on a scale that has never been done before,'' Cisneros said.

Reich said the new Labor Department guidelines regarding ``economically targeted investments'' - ETIs - were needed to clear up confusion over the department's policy on investments chosen for their social benefits. While some public pension funds have made such investments, private corporate funds have generally avoided them, in part because of fear they might violate federal laws designed to protect retirees.

According to the new guidelines, pension fund trustees can consider the ``collateral benefits'' of investments in affordable housing, start-up companies and other socially worthwhile projects when choosing among alternatives.

Reich emphasized that pension funds still are required to be invested for the exclusive benefit of workers and retirees. He said, however, that pension funds could make targeted investments, provided they also produced competitive financial returns.

Rep. James Saxton, R-N.J., issued repeated warnings at Wednesday's Joint Economic Committee hearing that the administration was headed in a direction that would hurt retirees.

He said studies had shown pension funds that invested in ETIs had worse financial results, hurting plan participants and taxpayers. He said that while some people might prudently pursue these kinds of investments, others would lose retirement money because of the new Labor Department guidelines.

by CNB