Group Leaves Social Security Overhaul Bloc
Signaling more troubles ahead for President Bush’s campaign to overhaul Social Security, a group representing the nation’s biggest financial companies said Monday that it had decided not to renew its membership in a business coalition raising millions of dollars to back the effort.
The Financial Services Forum, which represents chief executives from such corporate heavyweights as American Express, Citigroup and Goldman Sachs, was a co-founder of the Coalition for the Modernization and Protection of America’s Social Security, or Compass. But it left the coalition last month after its members failed to agree on Bush’s plan to let workers divert some of their payroll tax into individual investment accounts.
“We never really came to a consensus on things like personal accounts and endorsing any specific plan,” said Ken Trepeta, the forum’s vice president. “I couldn’t in good conscience sign our guys up for this.”
The move by the group, headed by former Rep. Rick Lazio (R-N.Y.), is the latest indication of the conflicting pressures facing corporate executives -- on one side, a White House eager for their backing on Bush’s top domestic priority and on the other, corporate shareholders wary of endangering profits by entering a politically charged battle that could alienate customers and some investors.
Trepeta said the forum had helped to create Compass to push for Social Security restructuring in general, and it was not prepared to become embroiled in a highly partisan war over private investment accounts.
“It’s all over the news, and people are debating and rebutting and hedging, and I guess in a way we are too,” he said. “We want to have a fair debate.”
Derrick A. Max, executive director of Compass, declined to comment Monday about the forum’s decision. A White House spokesman did not return a call.
The forum’s shift follows the decision by two securities firms -- Edward Jones and Waddell & Reed -- to drop out of a related lobbying group set up to promote private accounts on Capitol Hill, the Alliance for Worker Retirement Security.
Financial services companies have come under particular pressure from opponents of private accounts, especially the AFL-CIO. These critics charge that the companies stand to benefit from Bush’s plan to let workers divert taxes into stocks and bonds that the companies would manage.
The AFL-CIO wrote to Lazio on Monday demanding to know where his group’s members stood on private accounts and calling on the forum to “disavow” its support for the accounts.
Because labor unions control large amounts of money for investment, through pension and mutual funds and as institutional shareholders, they have strong leverage with brokerage and financial services firms. The AFL-CIO has organized demonstrations against some firms; more are planned this month against Charles Schwab and Wachovia. Schwab officials have said they remain neutral on private accounts.
Other companies are in similar positions. The drug manufacturer Pfizer Inc., for instance, is a member of the Alliance for Worker Retirement Security, but recently declared itself neutral on the issue of private accounts -- prompting charges from critics that the company was trying to please the White House and its investors at the same time.
Opponents of private accounts said Monday that the Financial Services Forum’s action could be far more significant than the decision by the two brokerage firms to quit the related group.
The forum represents 20 large firms and is the first known defection from Compass, which is raising an estimated $20 million to promote private accounts as part of a campaign coordinated with the White House and the Republican National Committee.
William Patterson, an AFL-CIO official who has helped organize the federation’s efforts to pressure corporations into withdrawing from the White House-backed coalitions, said Monday that he “applauded” the forum’s decision. He said the group’s move might heighten pressure on other financial services groups, such as the Securities Industry Assn., whose membership list overlaps that of the forum, to follow suit.
“The position that the industry associations have taken was untenable -- that you can be in an advocacy position while your members are telling the investing public that they’re neutral or not taking a position,” said Patterson, director of the AFL-CIO’s investment office. “We could not find a single firm that would stand by the Compass position.”
Trepeta downplayed the pressure applied by the AFL-CIO. He said the Financial Services Forum would remain engaged on Social Security, but without endorsing private accounts, and he left open the possibility that the group could rejoin Compass.
Still, the defection was the latest sign of the difficulties facing Bush as he tries to sway public and congressional opinion.
A new ABC News/Washington Post survey found that 35% of respondents approved of the way the president was handling Social Security, while 56% disapproved -- showing that Bush continued to fail to change minds even as he crisscrossed the country to campaign for private accounts. He visited four cities last week, and on Friday is set to visit Orlando and Pensacola, Fla.
“The administration is just now really stepping up our efforts to educate the American people about the problems facing Social Security and the need for a solution,” White House spokesman Scott McClellan said. “He is just now really stepping up the efforts to reassure seniors that nothing changes when it comes to those who are retired or near retirement.”
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