May 19 (Bloomberg) — Haste is the quality that is characterizing the investigation of Charles E.F. Millard, who headed the Pension Benefit Guaranty Corp. until the change in presidential administrations in January.

The PBGC insures defined-benefit pensions at private companies. Millard is under scrutiny by the PBGC's inspector general for his handling of contracts with JPMorgan Chase & Co., Goldman Sachs Group Inc. and BlackRock Inc.

The IG's final report was published yesterday morning. Yet last week the Senate's Special Committee on Aging was already scheduling a hearing for tomorrow to look into Millard's actions.

Not to be out-scooped by their Senate colleagues, the Woodwards and Bernsteins over at the House Committee on Education and Labor offered up something new within a day: a draft of the then-unpublished report on their Web site under the following nonpartisan headline: "House Labor Committee Opens Investigation into Alleged Improprieties by Bush Pension Agency Head."

The thrust of the inquiry is to determine whether Millard improperly intervened in awarding those contracts and used agency connections to look for his next job. Of course, that's not all of it. Lawmakers want to have fun skewering a capitalist at a time when capitalism looks bad.

Years of Delay

What's going on here? There's no evidence in the report that Millard really did seek a job at the three relevant firms. Over the longer run, the lawyers will figure out whether Millard really broke rules. What's striking, though, is the contrast between the alacrity of investigation in this case and the decades of congressional delay in reforming an insurer obviously heading toward budgetary disaster.

Consider the PBGC timeline. Long ago — as far back as the Studebaker automobile — it became clear that big industry was promising unions more benefits than it could deliver. When Studebaker closed its plant in South Bend, Indiana, in 1963, thousands of workers lost all or part of their pensions. Policy makers suggested that the U.S. form a "Central Pension Agency" to insure defined-benefit plans nationally.

It took a whole 10 years for Congress to pass the Employee Retirement Income Security Act, or ERISA, which, among other things, established the PBGC.

Even in 1974 it was beginning to be clear that defined-benefit programs — which fix the dollar amounts of pensions years before they are paid out — were too expensive to sustain. The PBGC's job was to cover those defined-benefit programs by collecting insurance premiums.

Reduced Workload

Congress and the market crafted an alternative to traditional pensions by establishing vehicles such as the 401(k), which passes investment choice, and market risk, on to employees. The hope was that a shift to so-called defined-contribution arrangements would eventually reduce the PBGC's workload.

The shift happened too slowly, in good part because of pressure at the bargaining table and in Washington from the very unions claiming precedence in the Chrysler LLC and General Motors Corp. negotiations this month.

From Bethlehem Steel Corp. to Pan Am, US Airways Group Inc. to UAL Corp., the PBGC budget couldn't keep up with the costs of pensions promised by failing companies. The law that created the agency put it in the ridiculous position of not being permitted to factor risk sufficiently into premiums. In 2007, General Motors and General Electric paid per capita rates that were disconcertingly similar.

Making an Effort

And since PBGC policy was to keep 75 percent to 85 percent of its overall portfolio in fixed-income products, returns were insufficient to compensate for deficits. Some changes were made in a 2006 pension law, but not enough to alter the structural problem.

It was Millard, now under fire, who actually made an effort to rectify this. He put forward a new mix for the PBGC portfolio: 45 percent fixed income, 45 percent diversified equities, 10 percent to alternative investments.

Millard argued that over time — and time was one of PBGC's few assets — market returns might narrow the deficits. Some of his predecessors hadn't supported changing the portfolio. Millard felt a shift was worth the risk.

The three cabinet members who oversee PBGC — the secretaries of Labor, Treasury and Commerce — voted to adopt such a shift in February 2008. It is Millard's implementation of this new plan that is under attack.

In short, Millard's plan was doubtless controversial. His implementation may have been, too. But the plan wasn't unreasonable.

Like Paulson, Geither

Maybe Millard was too clubby, or insufficiently paranoid, when it came to texting messages. But the firms Millard seems to have communed with are no doubt in regular contact with the Treasury Department, too. It is hard to hear without laughing that Congress is now going to spend time looking into whether a government official got close with Wall Street in the name of averting a financial crisis. After all, that is what both Hank Paulson and Timothy Geithner have done.

Retribution has its allure but is no substitute for reform. The real scandal here surrounds the company executives, from those at LTV Corp. in the 1980s to those at Chrysler today, who fail to acknowledge the need for pension reform. Larger still is the scandal of lawmakers and presidents — from Lyndon Johnson to George W. Bush — who failed to promulgate that reform in a timely way.

(Amity Shlaes, author of "The Forgotten Man: A New History of the Great Depression" is a Bloomberg News columnist. The opinions expressed are her own.)

© Copyright 2009 Bloomberg