Discount stock trading pioneer Charles R. Schwab has long supported the idea of diverting a share of Social Security taxes into private investment accounts.
Schwab endorsed a book on the subject in 1999. His San Francisco-based company is helping to fund a group that is lobbying Congress for private accounts. And he has written newspaper op-ed pieces calling for more retirement savings options that would "reduce the dependence on government assistance."
For The Record
Los Angeles Times Wednesday January 19, 2005 Home Edition Main News Part A Page 2 National Desk 1 inches; 50 words Type of Material: Correction
Social Security -- An article on Wall Street and Social Security investment accounts in Tuesday's Section A said mutual fund company T. Rowe Price Group Inc. had contributed to studies by the libertarian Cato Institute on the subject. T. Rowe Price said it hadn't helped fund such studies at Cato.
But with the debate over Social Security's future now kicking into high gear, the 67-year-old Schwab is staying out of the public eye. "He has made a specific decision" to decline interview requests on the topic, a spokesman said.
Schwab's reticence is emblematic of the peculiar wallflower role adopted by much of the U.S. financial services industry when it comes to overhauling Social Security.
The nation's brokerages and mutual fund companies could be big winners if the government were to allow Americans to funnel some of their Social Security taxes into private investment accounts each year. Firms such as Fidelity Investments, Vanguard Group, Merrill Lynch & Co. and Schwab collectively could reap billions of dollars in management fees and commissions over the long term.
But the emotions triggered by President Bush's call for restructuring Social Security also have raised the risk that the financial industry could become a target of public ire.
Bush has touted the accounts as a way for Americans to earn returns over time that would give them greater retirement income than Social Security can promise. Workers most likely would give up their right to a portion of their future Social Security benefits by choosing private accounts.
Powerful groups including the AFL-CIO and AARP have bashed the idea of privatization, saying it would shred the retirement safety net and leave more Americans at the mercy of market swings.
The AFL-CIO in December sent letters to 46 major financial companies, asking them to renounce the concept of private Social Security accounts.
Facing that kind of reaction, "most people in the [investment] business are keeping a very low profile," said Greg Valliere, chief strategist at Stanford Washington Research Group, a political consulting firm. "They don't want to be identified as proponents because of the potential backlash."
Among Wall Street's largest firms, Merrill Lynch, Morgan Stanley, Citigroup Inc. and Prudential Financial Inc. all declined to comment on the Social Security debate.
