December 21, 2004
Wall St. Lobby Quietly Tackles Social Security
By LANDON THOMAS Jr.
As President Bush prepares to disclose the details of his plan to funnel hundreds of billions of dollars of future Social Security funds into privately held investment accounts, Wall Street has begun a muted lobbying campaign, chastened by bolder forays that failed in years past.
So far, the chief executives of most financial firms have refused to take a public stand in support of private accounts, wary of being seen as too eager to embrace a potential new revenue stream.
At last week's White House economic meeting in Washington, they were conspicuous in their absence from the Social Security panel. Even in direct meetings with President Bush, who actively campaigned on the issue of Social Security, executives have shied aways.
There are signs, however, that the industry is becoming a little more aggressive in pushing for private accounts, through a loose assemblage of trade associations, business coalitions and conservative research centers. These groups have lately begun trying to raise money from business interests and to marshal support on Capitol Hill, while also seeking to deflect criticism that Wall Street is behind the move simply to reap rich rewards for administering the accounts.
The first salvo was launched by the Securities Industry Association, which recently issued a research report arguing that the private accounts would not be a financial bonanza for Wall Street. In the paper, the association calculated that firms would collect at least $39 billion in fees, and perhaps considerably more, from managing such accounts over the next 75 years. But the group noted that the fees charged would be significantly below the fees that investment firms receive these days from low-cost mutual funds.
And even if the fees rose significantly as more people chose actively managed accounts, the association's report argued, they would still pale in comparison with the $3.3 trillion in revenues Wall Street firms are projected to earn from their core securities business over that period.
The Investment Company Institute, the lobbying arm for the mutual fund industry, has not endorsed private accounts nor has it lobbied Congress on the matter. But while its members are reluctant to speak out publicly on the topic, the institute recently hired as its communications director F. Gregory Ahern, a former executive at State Street Corporation in Boston who was involved in that firm's aggressive lobbying effort for private accounts during the late 1990's.
Behind the scenes, the Alliance for Worker Retirement Security, a business coalition advocating private accounts, has begun meeting with Congressional and White House staff members, pushing the idea that private accounts are not only good for the country but also good for business.
In November, Derrick A. Max, the alliance's executive director, met with Charles P. Blahous, a special assistant to the president who has been at the forefront in the White House on Social Security. They have a strong connection, because Mr. Blahous preceded Mr. Max at the alliance.
At the meeting were representatives from the Securities Industry Association, Charles Schwab & Company, and the United States Chamber of Commerce, all members of the alliance.
The Club for Growth, a group financed largely by conservative business leaders that supports like- minded Congressional candidates, has also been active in the drive for privately held Social Security accounts. Members include Richard Gilder of Gilder Gagnon Howe & Company, a private investment firm, and Charles H. Brunie, the founder of Oppenheimer Capital.