Snow Asks Wall St. to Back Bush Plan

Treasury Secretary John W. Snow on Wednesday wrapped up a three-day trip to Wall Street, where he courted financial-industry backing for President Bush’s plan to create private investment accounts with a portion of Social Security funds.

In a series of meetings, Snow told executives of major stock brokerages and bond trading firms that the president’s plan would put the retirement program on solid long-term footing.

Snow also gauged Wall Street’s reaction to the prospect of financing a hoped-for transition to private investment accounts by selling an additional $100 billion to $150 billion a year in bonds over the next decade.

Securing Wall Street’s support for the billions in added sales is considered essential because the bond market is notoriously jittery, and any fear of runaway spending or ballooning budget deficits could spur a rise in interest rates that would raise the cost of any overhaul.

At a meeting Tuesday, executives of top bond dealers indicated that additional bond sales would not upset the market, said John Vogt, executive vice president of the Bond Market Assn. in New York, which held the gathering.

“The consensus was that in a $4-trillion bond market, an additional $100 billion a year for 10 years is not that significant,” Vogt said.

In a brief interview, Snow said Wall Street agreed that Social Security must be revamped to prevent it from going bankrupt in coming decades.

“Wall Street understands the numbers,” Snow said. “They know we’re on an unsustainable course.”

The Bush administration has yet to release a specific restructuring plan. But creation of individual accounts is expected to be a central element. Americans could steer perhaps a third of their Social Security payroll taxes, or as much as $1,000 a year, into stocks and bonds through these accounts.

Diverting current Social Security revenue into private accounts would necessitate additional government borrowing because that money is now used to pay benefits to current retirees.

Snow’s visit was one of several forays to New York that he was expected to make in coming months to lobby Wall Street. A meeting with other companies is scheduled in early to mid-February.

Besides the effect on the bond market, Wall Street is concerned about what role, if any, it might be asked to play in managing the funds.

Diverting funds to the stock and bond markets could be a boon to Wall Street by boosting demand for securities and generating fees. But companies fear that having to administer a multitude of small accounts, at government-mandated low fees, could be unprofitable.

“In general, there’s support for [increased] participation in the market,” said Ronald O’Hanley, vice chairman at Mellon Financial Corp. “But there’s skepticism about whether private accounts, and the cost and education efforts that go with them, are the way to go.”