Tension over pensions.

• Author: Mooneyham, Scott
• Position: CAPITALGOODS

Things could be worse for Janet Cowell. Instead of entering office during the Great Recession, she could have been elected in the Great Depression. Lots of banks, not just a few, could be shutting their doors; local governments could be defaulting on debt. Still, her biggest task is managing the state's public pension fund, responsible for benefits to nearly 800,000 retired and current state workers, and in the year before she took office, its value fell from $77 billion to $60 billion. For the first time in decades, the state treasurer cannot say that the pension fund is sufficient to meet its current and future obligations. (It has since rebounded to nearly $66 billion.)

Since markets crashed late last year, investment bankers have become even less popular than congressmen. As state treasurer, Cowell has a foot in the investment world and one in politics. But if she's worried about how that shattered public confidence might affect her job-approval rating, she's not showing it. "You run for public office," the Raleigh Democrat says, "you know what to expect." She calls some of what's happened a "healthy wakening up," with people becoming more wary of investment advisers and decisions. But there's more scrutiny of public pension funds. New York Attorney General Andrew Cuomo has been conducting a nationwide investigation into their investments, political donations by investment firms and kickbacks.

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The U.S. Securities and Exchange Commission has been focusing on public pension funds, too. It's considering rules to ban managers of public pension funds from taking campaign contributions from those they do business with. Another SEC proposal would prohibit the use of placement agents, middlemen acting as marketers between pension-fund managers and investment firms. Some of those placement agents have proven to be cronies of those managing pension funds, the "marketing" a means of shaking down the investment firms looking for business.

North Carolina has avoided the kinds of scandals that sent pension-fund officials to prison in Connecticut, New Mexico and New York. Cowell, though, has been coping with her own little messes. In August, she fired Patricia Gerrick, the fund's chief investment officer, from a $340,000-a-year job. Initially, Cowell offered no clues why. But newspaper accounts, based on public-record searches, reported that investment-firm executives had offered to help Gerrick's children with job searches...