Schwab: Don’t Pick Our Pockets to Line Yours!
Support for Privatizing Social Security Creates Conflict of Interest
Working families, union leaders and local elected officials today gathered outside Charles Schwab offices in San Francisco and Boston to demand that the brokerage firm drop its support for Social Security privatization. They said Schwab’s involvement creates a conflict of interest similar to previous Wall Street scandals in which financial firms put their narrow interests ahead of their duty to their customers and the investing public. They argued that Social Security privatization would saddle working Americans and the investing public with likely benefit cuts, increased risk and economic instability from enormous new government debt. Schwab is a leading proponent of private accounts and has funded groups lobbying for privatization.
“It’s unconscionable for Schwab and other financial firms to promote a plan that will cut Social Security benefits for working families,” said AFL-CIO President John Sweeney. “Wall Street firms like Schwab will be handpicked by politicians to manage private accounts and make billions of dollars in exorbitant fees.”
Chairman and CEO Charles R. Schwab is a longtime supporter of diverting Social Security funds into private accounts. The Schwab company has supported the Cato Institute and the Alliance for Worker Retirement Security, two of the most important groups lobbying for Social Security privatization. Officials from Charles Schwab have consulted with White House officials on the issue, and voiced support for privatization as a featured part of President Bush’s economic summit in December.
Union officials noted that the conflict of interest for financial services firms backing privatization is particularly clear at Schwab, as Schwab could be one of the big money-makers from privatization. Charles Schwab is the world’s largest discount broker and manages 401 (k) plans and other retirement funds. Schwab’s profits fell by 64 percent last quarter, and its stock price has dropped from a high near $50, to trade near $11. Privatization could bail out the ailing company if it garners a significant share of the privatized accounts.
“Privatization will give Schwab an opportunity to reap enormous profits at the expense of working families,” said Sweeney. “We won’t stand for such unethical practices and demand that Schwab and other firms drop their support for privatization.”
At the Schwab offices in Boston and San Francisco, the groups gathered with signs saying “Charles Schwab: Don’t Pick Our Pockets To Line Yours!” Labor leaders delivered a letter addressed to Chairman and CEO Charles Schwab and members of the Board of Directors that calls for Schwab to withdraw all support for the effort to privatize Social Security, and to publicly disclose all contributions and activities of the company in support of privatization.
The rallies kicked-off a grassroots campaign targeting firms boosting Social Security privatization. The AFL-CIO has launched an e-activist campaign to educate workers and give them an opportunity to contact Schwab and tell the firm to withdraw its support for privatizing Social Security. For more information visit www.aflcio.org.
The AFL-CIO also called on financial firms to publicly reject efforts to privatize Social Security. In a recent letter to Securities Industry Association (SIA) Chair Daniel Ludeman and SIA board members, Sweeney noted that "the SIA appears to be fronting a position that many member firms appear unwilling to take in public.” Schwab’s William L. Atwell is a member of the SIA Board. Sweeney urged the SIA to end its support for diverting Social Security revenues into private accounts. In December, Sweeney called on 46 member firms of the SIA to drop support for privatization and has subsequently found widespread reluctance among many firms to publicly embrace privatization, even as SIA supports highly partisan lobbying efforts.
Contact: Suzanne Ffolkes 202-637-5018
