Wall Street Hopes To Tap Pot Of Gold Money Managers Make Pitch For Social Security Overhaul
Wall Street is eyeing the Social Security system as a potential $60 billion annual windfall if Congress decides to turn part of the retirement safety net over to private money managers.
Wall Street firms, especially big mutual fund companies such as Fidelity Investments, are gearing up for a major lobbying effort about Social Security’s looming financial problems - and the role money managers might play in its salvation.
If some type of privatization were approved, it would “have a dramatic impact - from a positive standpoint - on the mutual fund industry if we do it smartly,” said John L. Steffens, a Merrill Lynch & Co. executive vice president.
But executives attending the Securities Industry Association’s annual meeting last week in Boca Raton, Fla., acknowledged that while getting a piece of Social Security’s business is attractive, obstacles lie ahead.
They are advising members to push for limited privatization as a more realistic political goal. Fidelity’s general counsel, Robert C. Pozen, also suggested brokerage executives try to persuade the American Association of Retired Persons to shift its current stand against diverting some Social Security money into individual retirement accounts.
The debate over privatization has emerged because Social Security faces a turning point in 2012. Starting that year, as the baby boomers retire, the fund will pay out far more than it takes in each year, leaving it insolvent by the year 2029 unless changes are made.
A government advisory council is expected to soon suggest three possible ways to avert that, all of which contain some element of privatization.
“This is definitely a big priority for Wall Street in the next Congress,” said Nancy Watzman of the Center for Responsive Politics.
Still, Wall Street also sees problems from any infusion of Social Security money.
Anticipated constraints could lower profitability, Wall Street executives say, and the cost to funds would be high.