Saturday, February 19, 2005

The Social Security Wall Street Giveaway

One of the biggest hurdles for Bush is that he has to privatize Social Security without handing over trillions in assets to Wall Street's investment banks because he knows that voters simply won't hand over even more of their retirement security to the people who brought us the dtcom crash and 401k plans loaded with Worldcom and Enron stocks. Bush's answer is that the money will be managed by the same Federal agency that manages money for members of congress. This is a big issue. Last week, I had lunch with two investment strategists from the Charles Schwab brokerage. That company's founder has been vocal in his support for abolshing Social Security in favor of private accounts. They told me that there were larg protests outside their Chicago offices recently. This is why Bush can't just give Social Security to Merrill Lynch or Morgan Stanley.

But, there are two wrinkles here. Despite what Bush says, this is still a giveaway to the financial services industry.

First, who do you think will sell the investment products to this federal agency? Who will clear its trades? It's pretty hard to invest in stocks and bonds without help from people with seats on the New York Stoch Exchange, after all.

Second, Bush's plan will require most workers, when they retire, to buy an annuity with their Social Securiy money. Annuities are dastardly little products where to actually pay some one to take all of your money and then pay you an allowance on a fixed schedule. You buy them so that you an be assured the money will last a certain amount of time, say, between 25-40 years. The government doesn't sell annuities, folks. Who does? Insurance companies, retail banks and investment advisory firms. So, those folks who brought you Worldcome and Enron will, indeed, get their hands on the money at some point -- they'll be selling you annuities tha you might be required, by law, to purchase! And, you'll be paying them fees for the service!

There's your Wall Street giveaway. They get the money, they just get it later, when everyone's forgotten about this little debate.

1 Comments:

At 11:52 AM , Blogger tifanie said...

I don't understand- the govt. is going to require people who retire under the current Social Security structure to purchase an annuity? Is that legal? And then what about people who enter the workforce once social security is presumably annihilated? I thought the whole invented point of this was that "we can invest our own money better on our own." If we are going to be told exactly what to do with the money, and that involves neccessarily padding the pockets of Wall Street and other fat cats, no wonder people are protesting outside their offices. I don't understand this cockamamy bullshit.

 

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