March 26, 2009
TIAA-CREF chief Ferguson urges continued investment in higher education
While the economy might be starting to show signs of life, TIAA-CREF head Roger Ferguson told a University of Iowa audience Wednesday that continued higher education financing is pivotal for future economic strength.
"The long-term financial and economic health of America depends on continued investment in higher education at institutions like the University of Iowa," said Ferguson, who delivered the Tippie College of Business' annual Howard Bowen Lecture in the Old Capitol Senate Chamber.
Ferguson has been president and CEO of the mutual fund and annuity firm since April. He has also served in a variety of positions for other financial services, consulting and law firms, and was a governor of the Federal Reserve System from 1997 to 2006, serving as vice chair from 1999.
Ferguson said that while the overall U.S. economic situation is still cloudy, he finds some hope in several pieces of recent economic news. For instance, the Leading Economic Indicators dropped at a less-than-expected rate in February and existing home sales increased during the month.
He said Treasury Secretary Timothy Geithner's plan to use a public-private partnership to take toxic assets off bank balance sheets shows promise, as well.
Ferguson also said the crisis offers financial lessons for Americans that he hopes will lead to initiatives limiting the kinds of excesses that inflated the economy in recent years and led to the current crisis.
Among them, he said, is greater involvement by shareholders and directors in a company's operation, particularly to control executive compensation; improved methods of risk management by financial institutions; an improved focus on customer service; and increased investment in higher education.
Ferguson said Americans also need to change the way we finance retirement. The traditional pension plan is all but dead, he said, forcing retirees to rely more and more on 401(k) plans. That model, however, is not sustainable.
"The 401(k) was meant to serve as a supplemental vehicle, not as the sole provider of income," he said. To replace it, he urges a new model that combines the 401(k), traditional pensions and other, new tools.
Among the new tools, he said, are automatic enrollment in employer retirement plans; offering objective investment advice to employee/investors; offering a broad diversification of retirement investments; a health care savings system for retirees; and a program that provides guaranteed income for retirees who can expect to live upwards of 30 years after retirement.
Ferguson noted in his lecture that Bowen, an economist who served as UI president from 1964 to 1969, developed the concept of corporate social responsibility, which TIAA-CREF practices, and was at one time an advisor to the firm.
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