Federal Reserve Chairman Alan
Greenspan said on Wednesday he would not support investing U.S.
Social Security funds in the stock market, as proposed by
President Clinton in his State of the Union address.
"What I do not support and did not support previously was
the investment of government funds, especially Social Security
trust funds, in private securities, especially equities,"
Greenspan told the Ways and Means Committee of the U.S. House of
Greenspan's comments may fuel opposition in the
Republican-led Congress to Clinton's proposal, which calls for
investing up to $700 billion of Social Security funds in the
stock market and subsidize retirement savings accounts the
biggest change in the U.S. retirement system's financing since
its inception 64 years ago.
The Social Security proposal was the major feature of
Clinton's State of the Union address, delivered on Tuesday to a
joint session of Congress.
Greenspan said government investment in private markets
would interfere with the efficient allocation of resources in
"Because I do not believe that it is politically feasible
to insulate such huge funds from a governmental direction, I'm
fearful that we will use those assets in a way, which one, will
create a lower rate of return for Social Security recipients,
but even a greater concern, that it will create sub-optimal use
of our capital resources and those assets which create our
standard of living," he said.
The White House says its proposal was aimed at boosting
returns to the Social Security system and helping keep it
solvent through at least 2055 without benefit cuts.
But the proposal has already been rejected by Rep. Bill
Archer of Texas, the chairman of the House Ways and Means
Committee, and a major group of corporate leaders.
"Such direct investment runs contrary to the fundamental
principles of democratic capitalism, and would result in undue
concentration of assets in certain market segments, share price
distortion, and market inefficiencies," the Business Roundtable
said in a statement, urging Clinton to reconsider his plans.