President Bush wants to perform the largest overhaul on Social Security in the pension fund's 75-year history with his proposal for diverting a portion of a workers' wages to private accounts, but one outside entity that stands to profit from the idea is surprisingly mum.
Wall Street, which would seemingly enjoy a windfall in fees and a surge in stock prices as millions of workers sock retirement cash into mutual funds, seems content to quietly sit on the sidelines while lawmakers and special interest groups hotly debate the merits of the President's plan, Newsweek reports.
The plan is Bush's answer to an anticipated shortfall in Social Security benefits in the next couple of decades. Critics say the fund isn't in trouble and argue that allowing workers to invest in mutual funds leaves their retirement money susceptible to the ups and downs of the stock markets. They also say the changeover would be too costly.
Meanwhile, as the leading financial firms await the fine print on a serious privatization proposal, the two principle lobbying groups for the industry--the Securities Industry Association on Wall Street and the fund industry's Investment Company Institute--have no major lobbying effort in the works, Newsweek said.
But why such timidity from a traditionally outspoken industry? Some executives ask what's the worth, as the fees on tens of thousands of tiny accounts are much lower than those of conventional mutual funds. Also, a flood of inexperienced investors could be a liability if the markets suddenly hit the skids. And then there's the P.R. element, where if the financial services industry publicly backs privatization it might be perceived as greedy.
"We're damned it we do or damned if we don't," an unnamed official with the SIA told Newsweek. "We're trying to thread the needle and be helpful without being a strong advocate."
As the fight inside the Beltway heats up in the coming months, however, many expect Bush's market-friendly administration will ask for a harder line.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.