It seems like a no-brainer that the prospect of privatized Social Security accounts would have Wall Street drooling. If the Bush administration's plan becomes a reality, financial firms stand to reap tens of billions in fees in coming decades as they welcome millions of new investors into the market as part of President Bush's much-touted "ownership society." An added bonus: all that new cash flowing into the market would bolster stock prices.The truth is that Wall Street firms would most likely lose on the deal. There would not be "tens of billions in fees" from a government run program and the liability and time required dealing with so many inexperienced investors would be enormous. Besides, Wall Street firms are working feverishly now to shed themselves of unprofitable small accounts (typically defined as less than $50,000 in assets). Adding millions of tiny new accounts to their books would be foolish. On the other hand, Wall Street won't publicly oppose a privatization plan because they know it's the right thing to do.
Sunday, February 20, 2005
Wall Street sits out
Charles Gasparino at Newsweek thinks it's a "no-brainer" that Wall Street firms would back Bush's plan to partially privatize Social Security. So he contemplates the silence.