Market cautious of Social Security plans for privatization

[question everything]

Market cautious of Social Security plans for privatization

Change to system finds few backers
By MICHAEL J. MARTINEZ
Associated Press

NEW YORK - There's been a curious silence on Wall Street since President Bush proposed that portions of Social Security be privatized.

It might seem that securities firms would be in for a windfall under the plan the billions of dollars that would pour into private investment accounts would generate millions of dollars in new fees and commissions. But the big Wall Street firms haven't been publicly supportive of the idea, probably because they're not sure how profitable those accounts will be.

(snip)

The ambivalent camp includes some of Wall Street's biggest names Morgan Stanley, Merrill Lynch & Co., and JP Morgan Chase & Co., for example. Publicly, these and other Wall Street icons have little to say, other than to reiterate their desire for a Social Security system that pays benefits and remains fiscally responsible.

(snip)

Sources at the big companies, speaking on condition of anonymity, said that getting in on personal investment accounts just isn't in their business plan. They invest on a much larger scale, handling individual accounts that at minimum have balances in the tens of thousands of dollars.

More..

http://www.dailybulletin.com/Stories/0,1413,203~21482~2681347,00.html#

[sundancekid]

1. turns out it's not so "curious" or "silent"-- likely to be the loss leader

concept that typically yields windfalls ... and the AP lead sentence is misleading ...

more from the article tells an added story:

snip

Yet the Securities Industry Association, a lobbying group of 43 Wall Street firms, has come out in support of privatization. That's because there's one thing that most everyone on Wall Street can agree upon: Getting more Americans investing would be a good thing.

"If you get all these folks with private self-directed accounts, that may stimulate interest in other accounts," Valliere said. "More interest in investing could lead to more business, the kind of business that Wall Street really wants."

snip

[More Than A Feeling]

2. According the article

the reason the Wall street trade association wants privatization is to get more people invested in the stock market, which would lead to more business for other types of accounts (so they think). I find this interesting, because that isn't the free market way. If Wall street wants more people in the stock market, they should offer products that attract more people to the stock market, or invest in more advertising. Relying on the government to force people into the market is not exactly the way the free market is supposed to work.

How ironic.

[davhill]

3. Having more dollars compete for investments

Should drive up stock prices also. A windfall for existing shareholders.

[Coastie for Truth]

4. Mandatory Private Accounts - as per Bush's proposal

would be a bonanza for the "Securities Fraud Class Action" Trial Lawyers (like Bill Lerach - the target of the 1996 Oxley-Gingrich "Securities Litigation Reform Act") and the more aggressive State Attorneys General - like Eliot Spitzer and Bill Lockyer.

And, there is no way to shield the financial services industry from liability --

Article VII.

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.

[fedsron2us]

5. They are aware of the British experiment with personal pensions

This has generated a huge mis-selling scandal. Even the financiers have acknowledged that it has been a disaster. More importantly, it did not generate much in the way of profits as the cost of running large numbers of small value policies was prohibitive. You can read all the gory details in Norma Cohens excellent article.

http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=8997