A Public Option for Asset Management in the United States
April 19, 2022
By Lenore Palladino
Private asset managers are the most powerful holders of corporate securities in the United States and manage trillions of dollars for US households and workers. Their central role in deciding where both household and corporate wealth is invested means they also have significant power over which sectors of the economy benefit from their financing. Their fiduciary duty mandates that their sole priority in making investment decisions is to maximize profits and in the financial value of the assets under their management. As a result, household savings are often invested against their best interests—such as interests in a healthy environment and sustainable economy.
In “A Public Option for Asset Management in the United States,” Lenore Palladino expands on a previous brief, “The Potential Benefits of a Public Asset Manager,” coauthored with Chirag Lala, and presents the economic case for a public asset manager. A public asset manager would be charged with investing in the interests of households, which would include considering the health and sustainability of the environment. This investment arm of the federal government would be useful in steering investment in service of a green economy. Palladino adds important historical context to this idea and further develops the policy prescriptions introduced in her earlier brief.
She draws two main conclusions:
- A public asset manager will act as an entity with the ability to redirect household investments in a manner that is aligned with their overall economic interest in a healthy planet and equitable economy; and
- A public asset manager will provide a public option that changes the incentives for private asset managers and reduces their ability to extract household wealth for themselves.